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Do Medical Bills Cause the Most Bankruptcies?

Submitted by Jen Jones on Sun, 10/04/2009 - 3:27pm

The current administration would love to perpetuate the common belief that most personal bankruptcies are the result of ruinous medical bills. News articles cite numerous studies and statistics that support this theory. But is it really true?

The "recent" Harvard study that has been bandied about lately as proof that the broken US healthcare system is behind the majority of personal bankruptcies was originally published in 2005, five years ago, and was based on data collected in 2001. The study states that "about half of people filing for bankruptcy said health care expenses, illness or related job-loss led them to do so." Politicians and the media are fond of attributing the "about half" statistic solely to health care expenses as a cause of bankruptcy, as in "about half of all bankruptcies are caused by medical bills."

In the study, the actual percentage of respondents who indicated that medical issues were a significant factor in declaring bankruptcy was 46.2. This number included people who had lost a job or income due to illness or injury. Only 27 percent of respondents citing medical reasons for declaring bankruptcy indicated that they had incurred uncovered medical bills exceeding $1,000 in the past two years. This leads one to believe that while medical reasons (illness or injury) may have been a major factor in filing bankruptcy due to the loss of a job or inability to work, only a small percentage of bankruptcies resulted from actual medical bills. Said one critic: "One thousand dollars in medical debt can hardly be considered catastrophic."

A second category in the survey entitled "any medical bankruptcyâ€ included people who cited addiction, uncontrolled gambling, childbirth, or the death of a family member as a major contributing cause. Only by including this second group in the total number were the authors of were able to increase the total percentage of "medical bankruptcies" to 54.5 percent.

Other factors may well have been in play, and the authors themselves acknowledged that if some respondents had not faced health care problems, they may still have found themselves in bankruptcy court. The authors state: "Many debtors described a complex web of problems involving illness, work, and family. Dissecting medical from other causes of bankruptcy is difficult. We cannot presume that eliminating the medical antecedents of bankruptcy would have prevented all of the filings we classified as 'medical bankruptcies.' "

The 2005 study was roundly criticized for these and other reasons and the authors decided to re-publish it with additional data and analysis gathered in 2007, thus addressing some of their critics and, for good measure, they increased the "medical bankruptcy" statistic from 54.5 up to a whopping 68.8. Bear in mind though, that this figure in the new study still includes people who have lost income due to illness or injury. Undoubtedly the loss of income, regardless of the cause, would be a major factor driving anyone into debt. That's pretty obvious - no fancy study needed to convince people of this truth.

But the authors of the Harvard study don't seem to want to put much emphasis on simple observations. They have pages and pages of data which have been carefully teased out of questionaires (not actual official documents) and interpreted to prove the link between bankruptcy and healthcare expenses. Interestingly, the results of their updated study were published anew earlier this year, just before the healthcare overhaul debate hit the fan.

The loss and reduction of health insurance coverage in this country during the past several years has been a national travesty. In some cases, it has sent honest, hardworking people further into debt. For the rest of us, it has made security seem more fleeting and difficult to obtain. For anyone with an overwhelming debt burden, whether it came from medical expenses or other sources, there can be relief. Seek the advice of a bankruptcy attorney to learn about your options.